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Author: 

Alexander  Hamilton 
institute,  New  York 

Title: 

Retail  delivery  costs  and 
methods 

Place: 

New  York 

Date: 


[1916] 


^^-^^110-7 


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••.  Retail  delivery  costs  and  methods.  Now  York 

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At  head  of  title:  Modorn  business.  Report  no.  74 


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MODERN  BUSINESS 
REPORT  No.  74 


Retail  Delivery  Costs  and  Methods 


3 

38c /^ 


6 


ALEXANDER    HAMILTON    INSTITUTE 

ASTOR  PLACE.  NEW  YORK 


COPYRIGHT.  J916.  PY   ALEX^NDER   HAMILTON    INSTITUTE 
All  rightt  for  reproduction  reserved 


:r::>2.sA-.s 


^\z. 


intlifCilpoflmgork 


LIBRARY 


School  of  Business 


\ 


MODERN   BUSINESS 

REPORT  No.  74 


Retail  Delivery  Costs  and  Methods 


Alexander  Hamilton  Institute 

ASTOR  PLACE.   NEW  YORK 


Alexander  Hamilton  Institute 

ASTOR    PLACE,    NEW  YORK 


ADVISORY   COUNCIL 


JOSEPH  FRENCH  JOHNSON,  D.C.S.,  LL.D. 
FRANK  A.  VANDERLIP,  LL.D. 


JEREMIAH  W.  JENKS,  Ph.D.,  LL.D. 
JOHN  HAYS  HAMMOND,  D.Sc,  LL.D. 


T.  COLEMAN  DU  PONT,  D.C.S. 


STAFF 


DWIGHT  E.  BEEBE, 

Collections 
HERBERT  F.  de  BOWER, 

Advertising  and  Sales  Policiei 

GEOFFREY   S.   CHILDS, 
Office  Methods 

EDWIN  J.  CLAPP, 

Transportation  and  Terminal  FacilitieM 

RAYMOND  J.  COMYNS, 
Personal  Salesmanship 

ROLAND  P.  FALKNER, 
Business  Statistics 

MAJOR  B.  FOSTER, 
Banking  Principles 

CHARLES   W.   GERSTENBERG, 
Financial  Problems 

LEO  GREENDLIXGER, 

Financial  and  Business  Statements 

J.  ANTON  de  HAAS, 

Foreign  Trade  and  Shipping 

EDWARD  R.  HARDY, 

Fire  Insurance 
WARREN  F.  HICKERNELL, 

Business  Conditions 
SOLOMON  S.  HUEBNER, 

Marine  Insurance 

JEREMIAH  W.  JENKS, 

Relation  of  Government   to   Business 

JOSEPH   FRENCH  JOHNSON, 

Economic  Problems;  Business  Ethics 

WALTER  S.  JOHNSON, 
Commercial  Laic 

EDWARD   D.  JONES, 
Investment 


JOHN  G.  JONES, 

Sales   Management 
DEXTER   S.   KIMBALL, 

Cost  Finding 

BERNARD   LICHTENBERG, 
Advertising  Principles 

HARRISON  McJOHNSTON, 
Business  Correspondence 

FRANK  L.  McVEY, 

Economics 
JOHN  THOMAS  MADDEN, 

Accounting  Practice 

MAC  MARTIN, 

Advertising  Campaigns 

G.  F.  MICHELBACHER, 

Compensation  and  Liability  Insurance 

BRUCE  D.  MUDGETT, 
Life  Insurance 

E.  L.  STEWART  PATTERSON, 

Domestic  and  Foreign  Exchange 

FREDERIC  E.  REEVE, 

Accounting  Principles 
FRED  C.  RUSSELL, 

Auditing 

B.   K.   SANDWELL, 

International  Finance 

W.   W.   SW ANSON, 

Money  and  Banking 

JOHN  B.  SWINNEY, 
Merchandising 

PETER  P.  WAHLSTAD, 

Credits 
WILLIAM  H.  WALKER, 

Corporation  Finance 


RETAIL    DELIVERY    COSTS    AND    METHODS 


OUTLINE    OF    REPORT    74 

PAGE 

I.  The  Use  of  Various  Types  of  Equipment  .      .      .      .5 
II.  Mileage g 

III.  The  Moving  Factor 7 

IV.  Increasing  the  Moving  Factor g 

V.  Fixed  Charges  High  in  Motor  Truck  Operation  .     .     8 

VI.  Depreciation g 

VII.  Interest ^q 

VIII.  Labor  Cost 10 

IX.  Maintenance j^ 

X.  Operating  Expenses ^2 

XI.  The  Human  Element ^2 

XII.  Records  and  Reports     . jg 

XIII.  Routing  Deliveries ^9 

XIV.  The  Assembling  of  Materials  for  Delivery     ...   19 


ai 


PREFATORY  NOTE 

A  very  important  element  in  the  cost  of  conducting  a  retail  busi- 
ness is  delivery.  Shall  motor  trucks  be  used,  or  would  horse-drawn 
vehicles  be  more  effective?  Or  perhaps  a  bo)^  with  a  push-cart  is  all 
that  is  necessary.  Many  points  nmst  be  taken  into  consideration  if 
the  correct  solution  is  to  be  reached,  and  this  Report  will  prove  a 
valuable  aid  to  the  retail  storekeeper  by  bringing  these  points  to  his 
attention  and  offering  solutions  to  fit  different  types  of  business. 


J. 

i 

1 


RETAIL   DELIVERY   COSTS   AND   METHODS 

Delivery  service  constitutes  a  serious  problem  for  managers  of 
retad  stores.     This  is  an  expensive  service  which  the  consumer  de- 
mands of  the  retailer  on  the  major  portion  of  his  purchases,  without 
regard  to  whether  they  are  large  or  small,  valuable  or  trifling,  so  that 
in  many  cases  the  cost  of  delivering  an  article,  if  its  pro  rata  share 
of  that  cost  were  assigned  to  it,  amounts  to  more  than  the  total  sales 
value  of  the  article.     While  the  consumer  demands  this  expensive 
service,  there  is  no  part  of  our  whole  business  organization  which  is 
more  vigorously  criticized  by  the  consumer  than  the  retail  dealer, 
smce  his  charges  for  service  are  a  considerable  part  of  the  total  cost  of 
the  article  to  the  consumer,  ranging  anywhere  from  10  per  cent  up 
to  75  per  cent  of  the  total  cost  of  the  article  to  the  consumer  in 
different  lines  of  goods  and  different  circumstances.    Yet  in  spite  of 
these  large  margins  between  cost  and  selling  price,  from  which  the 
consumer  draws  the  conclusion  that  the  retail  dealer  must  be  making 
an  exorbitant  profit  and  that  his  prices  are  unreasonably  high,  the 
majority  of  retail  businesses  are  not  highly  profitable.     Therefore 
the  charges  added  to  the  cost  of  goods  by  the  retailer  do  not  indicate 
a  monopoly  profit  nor  a  large  competitive  profit,  but  an  extremely 
high  cost  of  doing  business.     It  is  only  thru  a  deduction  of  these 
costs  that  the  retailer  can  hope  to  make  his  business  show  a  reasonable 
profit,  since  competition  is  so  easily  established  in  retail  markets  that 
it  is  impossible  to  raise  prices  above  the  point  at  which  the  average 
retailer  can  exist  and  stay  in  business  without  making  any  more  than 
a  reasonable  return  on  his  own  labor  and  capital  and  without  anything 
in  the  way  of  a  true  net  profit. 

How  serious  a  problem  this  delivery  expense  may  become  is  illus- 
trated by  the  fact  that  in  its  careful  investigation  of  the  expenses  of 
retail  grocery  stores  the  Harvard  School  of  Business  Administration 
reports  that  in  some  cases  these  delivery  expenses  run  as  high  as  5.9 
per  cent  of  the  net  sales  of  the  company.  The  common  figure  for  such 
expense  is  3  per  cent  of  the  net  sales. 

The  Use  of  Various  Types  of  Equipment— The  conditions  under 
which  delivery  service  is  operated  and  the  costs  of  the  service  under 


4?' 


these  conditions  differ  so  widely  that  it  is  impossible  to  quote  any- 
thing in  the  way  of  cost  figures,  which  will  be  representative  of  the 
cost  of  a  large  number  of  businesses.  As  a  result  of  an  elaborate 
investigation  of  the  costs  of  operating  different  types  of  equipment, 
the  electrical  engineering  department  of  the  Massachusetts  Institute 
of  Technology  reports  the  costs  of  operating  different  kinds  of  equip- 
ment as  follows: 

1,000-lb.  1,000-lb.  One-horse 

electric  gasoline  wagon 
Suburban  Parcel  Delivery: 

Cost  per  day $8.60  $10.40  $3.90 

Miles  per  day   37  39  17 

Cost  per  mile    $0.28  $0.27  $0.23 

Deliveries  per  day    128  138  46 

Cost  per  delivery    $0,067  $0,075  $0,085 

City  Parcel  Delivery: 

Cost  per  day $8.30  $10.10  $4.27 

Miles  per  day   33  34                          16 

Cost  per  mile   $0.25  $0.30  $0,266 

Deliveries  per  day    198  204                        96 

Cost  per  delivery    $0,042  $0.05  $0,044 

In  these  tables  the  figures  are  compiled  from  actual  records,  in 
which  the  figures  for  the  electric  and  gasoline  cars  are  on  substan- 
tially the  same  conditions  of  mileage  and  number  of  deliveries,  while 
the  horse  figures  are  for  considerably  less  mileage  and  a  smaller  num- 
ber of  package  dehveries,  but  are  taken  from  routes  of  the  same  gen- 
eral nature  as  in  the  case  of  the  motor  cars. 

Mileage. — In  determining  what  type  of  equipment  to  use,  the 
nature  of  the  service  should  be  carefully  studied.  Consideration  must 
be  given  to  the  factor  of  mileage  in  the  first  place,  since  the  mileage 
of  each  type  of  equipment  is  definitely  Hmited.  A  horse  can  travel 
twenty  miles  a  day  with  light  loads,  but  this  mileage  must  be  reduced 
considerably  as  the  load  is  increased.  A  formula  for  determining 
the  mileage  which  may  be  safely  obtained  from  horses  is:  D  =  20  — 
5  T,  in  which  D  is  distance  and  T  is  tonnage.  Thus,  in  case  of  half- 
ton  loads,  distance  is  equal  to  20  —  5  times  I/2  or  171/2  miles  per  day. 

The  electric  truck  likewise  is  strictly  limited  in  the  mileage  which 
it  can  perform,  but  not  so  closely  limited  as  to  be  unable  to  perform 
most  deliveries.  At  the  present  time  the  performance  of  electric  cars 
on  a  single  charge  is  Hmited  to  about  forty-two  miles.  Many  per- 
formances are  on  record  far  in  excess  of  this  distance,  but  this  is  the 

6 


limit  which  can  be  safely  calculated  in  figuring  on  an  electric  car  for 
delivery  service.  Mileage,  of  course,  can  be  increased  by  the  installa- 
tion of  extra  batteries  or  by  the  process  of  a  partial  recharge  known  as 
"boostmg,"  but  these  are  expensive  and  subject  the  work  to  delays. 
The  gasoline  truck  is  probably  the  better  vehicle  for  services  which 
require  over  forty  miles  daily.  It  has  no  limitation  as  to  distance, 
except  the  limitation  of  distance  at  which  it  becomes  cheaper  to  ship 
by  rail  and  use  express  companies  for  delivery.  This  point,  of  course, 
varies  both  with  the  amount  and  regularity  of  the  packages  to  be 
delivered,  and  the  mileage. 

The  Moving  Factor.— An  important  consideration  in  determining 
the  type  of  equipment  which  shall  be  used  for  delivery  service,  is  what 
IS  known  as  the  moving  factor,  or  the  ratio  of  the  time  that  a  vehicle 
IS  m  motion  to  the  total  working  time.     This  moving  factor  varies 
widely  m  different  types  of  delivery  service.     For  example,  in  a 
densely  populated  section  of  a  large  city,  there  are  likely  to  be  a 
great  number  of  deliveries  made  within  a  limited  area,  which  makes 
an  extremely  low  moving  factor.     In  New  York  City  there  are  de- 
hvery  routes  which  do  not  actually  include  more  than  four  miles  of 
travel,  on  which  two  men  with  a  horse  and  wagon  are  sent  out  for  a 
half  day.    The  moving  factor  in  this  case  is  only  16  per  cent,  assum- 
ing that  the  horse  travels  at  the  rate  of  five  miles  an  hour  and  is  there- 
fore actually  in  motion  eight-tenths  of  an  hour.     In  such  a  case  a 
horse  is  by  all  means  the  most  economical  form  of  delivery,  since  a 
motor  thru  its  rapidity  of  motion,  even  if  it  moved  at  a  speed  of 
twenty  miles  an  hour,  which  it  could  not  do  on  such  short  distances 
could  save  only  36  minutes  on  a  half  day's  work  over  such  a  delivery 
route.    This  would  be  totally  inadequate  to  compensate  for  the  greater 
cost  of  the  motor  vehicle  per  day.     Where  density  of  deliveries  is 
unusually  high,  and  distances  are  short,  it  follows  that  the  moving 
factor  is  low  and  in  most  cases  horse  delivery  is  cheaper  than  motor 
car.    In  the  case  of  small  markets  doing  a  strictly  local  business,  which 
IS  practically  all  within  a  few  blocks  of  the  store,  a  boy  with  a  push- 
cart or  basket  is,  of  course,  a  vastly  cheaper  means  of  delivery  than 
any  form  of  horse  vehicle  or  motor  car.    This,  however,  applies  to  a 
comparatively  few  concerns  and  is  often  considered  objectionable  in 
that  customers  often  demand  their  goods  in  a  fine-looking  equipage. 
On  routes  where  the  moving  factor  is  moderately  low  and  the  density 
of  deliveries  is  comparatively  large,  the  electric  vehicle  has  an  ad- 
vantage of  greater  speed  over  the  horse  and  of  lower  cost  over  the 

7 


1  ■ 


gasoline  motor.  This  advantage  is  particularly  marked  over  the  gaso- 
line motor  as  the  density  of  deliveries  increases,  because  frequent 
starts  and  stops  greatly  increase  the  expense  of  operating  a  gasoline 
car.  There  is  always  the  tendency  on  the  part  of  the  drivers  where 
they  are  making  many  short  stops  to  let  the  engine  run,  so  that 
over  a  route  in  which  deliveries  are  frequent,  a  gasoline  engine  is  hkely 
to  run  continuously.  On  delivery  routes  in  which  the  density  is  low 
and  in  which  mileage  is  large,  or  which  have  a  high  moving  factor, 
the  gasoline  car  is  superior,  since  its  greater  speed  and  low  operating 
cost  on  long  runs  suit  it  particularly  to  this  kind  of  business. 

Increasing  the  Moving  Factor. — In  the  operation  of  motor  trucks 
of  all  capacities  it  is  essential  to  keep  the  moving  factor  as  high  as 
possible.  It  has  been  the  experience  of  many  concerns  which  have 
replaced  horse  equipment  with  motor  trucks,  that  the  cost  of  their 
hauling  has  increased  with  the  change,  because  they  have  attempted 
to  handle  the  motor  trucks  in  the  same  way  as  they  have  previously 
handled  their  horse  equipment.  When  changes  have  been  made  in 
the  methods  of  loading  and  unloading  goods  to  reduce  considerably 
the  time  of  standing  for  loading,  the  cost  of  their  hauling  has  de- 
creased to  a  point  considerably  below  the  cost  of  doing  the  work  with 
horses.  A  case  may  be  taken  from  the  hauling  of  coal.  When  the 
coal  is  carried  into  a  cellar-way,  or  unloaded  with  a  shovel  so  that  the 
time  involved  is  considerable,  a  horse  team  will  do  the  work  cheaper, 
even  on  hauls  of  considerable  distance.  But  if  the  coal  is  loaded  in- 
stantaneously from  an  overhead  pocket  and  may  be  dumped  in  un- 
loading with  an  automatic  hoist,  the  motor  truck  will  be  the  most 
economical  means  of  delivery. 

The  installation  of  motor  trucks  in  place  of  horses  requires  usually 
the  development  of  automatic  means  of  loading  and  unloading,  which 
will  result  in  keeping  the  motor  truck  on  the  road  a  large  part  of  the 
time. 

Fixed  Charges  High  in  Motor  Truck  Operation. — The  impor- 
tance of  what  was  stated  above  regarding  the  necessity  of  keeping 
motor  trucks  moving  to  make  them  profitable  will  be  appreciated, 
when  it  is  considered  that  the  cost  of  operating  motor  trucks  consists 
of  about  75  per  cent  of  fixed  charges,  which  are  incurred  whether  the 
truck  is  used  or  idle,  and  about  25  per  cent  of  operating  expenses, 
which  vary  practically  in  proportion  to  the  mileage  made  by  the  truck. 
In  this  estimate  the  wages  of  the  driver  are  considered  as  part  of  the 
fixed  charges.     This  would  be  eliminated  in  case  the  truck  were  to 

8 


stand  idle  for  a  long  period  of  time  and  then  would  materially  reduce 
the  cost  of  carrying  the  truck  in  idleness.     The  proportion  of  fixed 
charges  is  somewhat  higher  in  the  case  of  the  gasoline  motor  than  in 
the  case  of  the  electric  motor.     In  the  case  of  horse  equipment  the 
extra  charge  for  the  horse  is  practically  a  fixed  charge,  altho  in  the 
case  of  a  long  period  of  idleness  this  charge  could  also  be  reduced  by 
laymg  off  the  driver  and  the  reduction  of  the  feed  given  to  the  horse. 
For  purposes  of  considering  idle  time,  which  occurs  for  short  periods 
at  mtervals  and  in  standing  waiting  for  loads,  or  unloading,  in  aU  of 
these  cases  there  is  a  very  large  proportion  of  the  cost  which  is  abso- 
lutely fixed. 

Depredation.— The  application  of  the  motor  truck  to  industrial 
purposes  is  so  recent  and  has  been  so  rapidly  changed  and  improved 
smce  its  advent  into  the  business  world,  that  there  is  as  yet  no  well- 
developed  standard  for  the  depreciation  of  motor  truck  equipment. 
The  exhaustive  investigation  of  the  Massachusetts  Institute  of  Tech- 
nology, however,  resulted  in  the  conclusion  that  the  life  of  an  electric 
motor  truck  may  be  safely  figured  on  an  average  of  eight  years,  and 
consequently  an  average  allowance  of  12I/2  per  cent  a  year  should 
be  made  for  depreciation.     The  average  life  of  a  gasoline  truck  as 
determmed  by  the  Institute,  is  estimated  at  ^y^  years  and  conse- 
quently must  be  depreciated  at  the  rate  of  20  per  cent  a  year.    This 
does  not,  of  course,  mean  that  any  particular  motor  truck  will  last 
this  number  of  years,  but  it  does  indicate  that  with  reasonably  good 
care,  the  average  of  a  fleet  of  motor  trucks  should  reach  these  figures. 
From  the  total  value  of  the  trucks  when  they  have  depreciated,  the 
junk  value  which  remains  at  the  end  of  the  useful  life  of  the  truck  must 
be  deducted.    This,  however,  is  a  comparatively  small  item  in  the  case 
of  motor  trucks. 

There  is  likewise  a  wide  variation  in  the  practice  of  different  com- 
panies in  depreciating  their  horse  equipment,  but  the  tendency  is  to 
regard  the  active  life  of  the  horse  at  about  four  years,  under  condi- 
tions of  regular  and  hard  service.    At  the  end  of  four  years  of  hard 
service  a  horse  is  often  in  condition  to  work,  but  its  capacity  has 
probably  decreased  so  that  it  is  considered  economical  to  sell  the  horse 
and  secure  a  new  and  younger  one  which  will  be  capable  of  more 
efficient  service.    Such  a  horse,  of  course,  has  a  considerable  value,  so 
that  the  amount  of  depreciation  to  be  figured  is  not  25  per  cent  of 
his  full  value,  but  25  per  cent  of  the  loss  in  value.    A  wagon  should 
be  capable  of  ten  years'  service,  and  10  per  cent  is  a  reasonable  allow- 

9 


r'-A 


ance  for  depreciation  on  wagons.  Harness  and  other  horse  equipment 
are  subject  to  a  somewhat  higher  rate  of  depreciation  than  wagons, 
but  a  10  per  cent  charge  covering  all  equipment  outside  of  the  horses 
should  amply  provide  for  depreciation  of  this  type  of  equipment. 

Interest— The  best  practice  includes  a  charge  for  interest  in  the 
cost  of  any  form  of  equipment.  This,  however,  should  not  be  made  on 
the  total  purchase  value  of  the  equipment,  since  it  is  to  be  depreciated 
annually  by  a  certain  amount,  thereby  reducing  the  amount  of  the 
investment^n  material.  Consequently,  the  rule  is  to  charge  interest 
at  6  per  cent  on  one-half  of  the  investment  value  of  an  equipment 
of  this  nature.    This  apphes  to  both  motor  truck  and  horse  equipment. 

The  insurance  of  motor  trucks  varies  considerably  under  different 
forms  of  contracts  and  in  different  hues  of  business,  but  it  may  be 
estimated  at  about  U/s  per  cent  on  one-half  of  the  investment  value 
for  electric  trucks  and  about  21/2  per  cent  on  one-half  of  the  mvest- 
ment  value  for  gasoUne  trucks ;  this  will  vary  somewhat  from  place 

to  place. 

A  charge  must  be  included  in  the  expense  of  operating  dehvery 
equipment  for  garage  or  stable  purposes.  This  varies  largely  accord- 
ing to  the  locahty  and  conditions.  In  many  cases  where  a  concern 
owns  its  own  stables  or  garage  equipment,  the  item  is  overlooked  and 
not  included  in  the  charges.  For  the  garage,  a  charge  must  be  allowed 
varying  from  a  low  figure  in  country  districts,  up  to  about  $300  a 
year  in  large  cities  where  land  is  extremely  valuable.  Three  hundred 
dollars  per  year  would  probably  cover  the  garage  expense  of  the 
largest  motor  trucks  in  the  larger  cities. 

Labor  Cost.— The  wages  of  drivers  for  these  trucks  also  vary 
considerably  in  different  locahties.  Operators  for  gasohne  trucks 
require  a  somewhat  higher  degree  of  mechanical  skill  than  do  drivers 
of  electric  trucks  and  command  usually  from  $2.50  to  $4.00  per  day. 
Drivers  for  electric  trucks  can  be  obtained  for  a  slightly  lower  figure. 
The  wages  paid  such  drivers  are  stated  as  from  $2.25  to  $3.25  per 
day.  Drivers  of  horse  equipment  can  be  obtained  still  cheaper.  Many 
concerns  have  transferred  their  drivers  from  horse  equipment,  when 
that  has  been  discarded,  to  the  new  motor  truck  equipment,  but  this 
is  not  always  satisfactory  and  is  scarcely  advisable  in  the  case  of 
gasoline  trucks.  This  illustrates  one  of  the  difficulties  of  introducing 
motor  trucks  as  dehvery  equipment,  since  the  men  who  have  been 
doing  the  driving  and  are  trained  in  the  knowledge  of  the  detail  of  a 
business  which  pertains  to  the  work  of  a  driver,  often  have  to  be  re- 

10 


placed  with  new  men,  who  are  not  only  more  expensive  to  hire,  but 
must  be  given  training  before  they  are  really  useful  workers.  This 
is  also  a  point  in  favor  of  the  electric  truck,  which  is  simpler  to  operate 
than  the  gasohne  truck,  and  on  which  it  is  often  practical  to  place 
men  who  have  formerly  driven  horse  equipment  for  the  company. 
The  item  of  drivers'  wages,  of  course,  is  an  important  part  of  the 
cost  of  the  operating  delivery  equipment.  In  some  cases  of  the  sub- 
stitution of  motor  truck  equipment  for  horse  equipment,  the  item  of 
a  reduction  in  wages  of  operators  and  helpers  makes  up  the  total 
saving  which  is  effected  by  the  change.  For  example,  where  a  motor 
truck  may  be  made  to  do  the  work  of  two  or  three  horse  trucks,  it 
often  requires  only  one  operator  and  one  helper,  whereas  it  may  be 
necessary  to  equip  each  of  the  horse  trucks  with  one  operator  and 
one  helper,  because  of  the  heavy  weight  of  some  of  the  goods  to  be 
handled.  Such  a  consideration  is  one  of  prime  importance  in  the 
determination  to  replace  horse  equipment  with  motor  trucks.  A 
similar  consideration  is  the  possibihty  of  operating  a  truck  without 
any  helper,  which  may  be  often  gained  by  instaUing  some  automatic 
unloading  device  on  which  the  first  cost  may  be  considerable,  but  which 
will  be  economical  if  it  will  enable  the  saving  of  the  wages  of  one  man 
on  a  considerable  part  of  the  work  which  the  truck  does. 

The  matter  of  administrative  expenses  for  motor  truck  equipment 
is  one  on  which  few  data  are  available,  but  it  is  estimated  that  about 
$45  to  $90  per  year,  per  car,  should  be  allowed  to  cover  administrative 
expenses. 

Maintenance. — Under  this  heading  are  included  all  repairs,  ex- 
penses for  tires,  parts,  battery  renewals,  and  other  expenses  of  hke 
nature.  Statistical  reports  obtained  from  a  large  number  of  cars 
operated  under  widely  different  service  conditions  and  including  cars 
of  various  capacities,  show  that  these  expenses  for  maintenance  vary 
directly  in  proportion  to  the  mileage  made  by  the  car.  The  actual 
amount  of  such  expenses  will,  of  course,  differ  widely  with  different 
cars  and  different  types  of  service,  but  in  all  cases  on  a  fleet  of  cars 
they  will  correspond  closely  to  the  mileage  made.  This  expense  also 
varies  materially  with  the  age  of  the  car.  It  is  unsafe  to  consider 
the  record  of  a  car  for  the  first  few  months  in  service  as  any  criterion 
of  the  amount  of  maintenance  expense  which  will  be  incurred  during 
its  life.  It  has  been  determined  that  the  expense  for  maintenance 
increases  constantly  in  the  case  of  electric  trucks  up  to  the  period  of 
eighteen  months,  after  which  the  expense  is  practically  constant  for 

11 


<^T" 


the  life  of  the  car,  except  as  it  varies  with  the  mileage  which  the  car 
makes.  In  the  case  of  gasoline  cars  there  is  a  steady  increase  until  the 
car  is  three  years  old  and  a  much  lower  increase  thru  the  remainder 
of  the  life  of  the  car.  Careful  tests  fail  to  show  any  considerable 
difference  in  the  cost  of  maintenance  incurred  when  sohd  tires  are 
used  or  when  pneumatic  tires  are  used.  These  tests  were  made  with 
the  idea  that  the  use  of  pneumatic  tires  might  reduce  wear  and  tear 
on  the  car  and  make  a  considerable  difference  in  the  expense  of  main- 
tenance, but  the  results  showed  only  such  a  shght  difference,  that  it 
may  be  considered  negligible. 

Operating  Ea^penses.—OipeTSitmg  expenses  also  vary  in  propor- 
tion to  mileage.    These  expenses  are,  however,  somewhat  greater  per 
mile  on  short  hauls  with  frequent  stops  than  they  are  on  long  steady 
runs.    In  operating  expenses  are  included  only  expenses  incurred  for 
fuel,  current,  and  lubricating  oils.    On  a  1,000  pound  delivery  wagon 
these  expenses  will  amount  to  about  one  and  seven-tenths  cents  per 
mile  for  current  and  lubricants  for  an  electric  car  and  about  two  and 
six-tenths  cents  per  mile  for  gasohne  and  lubricants  for  a  gasoline 
car.     These  figures  also  vary  under  difficult  operating  conditions, 
as,  for  example,  the  existence  of  many  hills  or  bad  roads  in  the  terri- 
tory covered.    The  amount  of  these  charges  also  depends  to  a  con- 
siderable extent  on  the  care  exercised  by  the  driver  in  handUng  his 
car  and  it  is  of  great  importance  that  he  shall  be  properly  instructed 
and  given  some  inducement  to  handle  his  car  in  a  careful  way,  to 
reduce  the  expense  of  operating. 

The  Human  Element— The  proper  supervision  of  drivers  ot  de- 
livery equipment  is  a  trying  problem,  because  the  men  are  away  from 
the  eye  of  any  supervisor  and  must  be  left  largely  to  their  own  de- 
vices  while  on  the  road.     It  is  easy  to  devise  a  code  of  rules  for  the 
ranajeme^  of  equipment  on  the  road,  but  it  is  difficult  to  secure 
the  careful  attention  of  the  drivers  to  following  these  rules  m  such 
a  way  as  to  reduce  the  expense  of  operating  to  a  minimum  and  to 
obtain  the  greatest  possible  results  from  the  use  of  equipment     It  i 
beheved  by  investigators  that  the  use  of  motor  trucks  m  place  of 
horL  exerts  a  psychological  effect  upon  the  drivers  ^f^^^^^^ 
their  movements  in  harmony  with  the  greater  ^P^f  «  J^^^^/^^ 
ment.     It  is  impossible  to  determine  definitely  what  the  extent  o 
Tuch  an  effect  is  but  managers  of  delivery  services  must  draw  their 
own  conclusions  as  to  the  value  of  this  feature. 

12 


Records  and  Reports. — It  is  of  prime  importance  to  obtain  records 
of  the  performance  of  each  individual  operator  and  of  each  machine 
in  a  company's  service,  which  will  result  in  giving  accurate  informa- 
tion regarding  the  performance  of  different  types  of  machines  and 
also  regarding  results  which  different  operators  get  from  the  same 
machines. 

Such  records  are  essential  to  any  effort  to  increase  efficiency  of 
delivery  work.  They  give  an  accurate  check  upon  the  work  of  a 
driver  when  he  is  out  of  sight  of  the  management.  There  is  always 
the  possibility  of  a  considerable  increase  in  efficiency  thru  compari- 
sons of  the  records  of  different  men  and  different  types  of  equipment. 

In  Figures  I  and  II,  which  follow,  are  reprinted  the  forms  dis- 
tributed by  the  Studebaker  Corporation  to  owners  of  Studebaker 
commercial  vehicles,  for  their  use  in  checking  up  accurately  the  work 
of  their  equipment  and  operators.  It  is  advisable  in  almost  every 
case  to  have  forms  for  records  devised  especially  to  meet  the  needs 
of  the  particular  cases.  It  is  Hkely  that  these  forms  will  not  be  ap- 
plicable to  some  lines  of  business,  but  the  outlines  will  give  an  idea 
of  what  is  needed.  They  consist  of  a  daily  report  from  each  driver, 
showing  the  speedometer  readings  and  the  day's  mileage,  the  number 
of  packages  delivered,  the  amount  of  gasoline,  oil,  or  electrical  cur- 
rent used  in  the  machine,  and  any  incidental  expense  or  repair  ex- 
pense which  may  be  charged  to  the  machine.  These  should  be  posted 
to  a  monthly  summary  of  the  driver's  record  from  which  can  be  com- 
puted the  total  expense  for  each  of  the  items  per  mile,  the  number  of 
miles  per  hour  of  working  time  made  by  the  vehicle,  the  number  of 
packages  delivered  per  hour  of  working  time,  and  the  cost  of  dehvery 
per  package  for  each  driver.  Such  a  series  of  records  will  give  the 
basis  for  weeding  out  the  poorer  drivers,  or  improving  the  quality 
of  their  service. 

It  has  not  been  usual  in  most  concerns  to  keep  careful  records 
of  the  work  of  their  horse  equipment  in  delivering  goods,  but  it  is 
profitable  to  keep  records  of  the  accomplishment  of  such  equipment, 
as  well  as  careful,  close  record  of  expense  incurred  in  maintaining 
and  operating  power  equipment.  These  reports  should  include  care- 
ful record  of  the  total  working  hours  and  idle  hours  for  the  horse, 
the  number  of  packages  delivered,  and  the  mileage  made  by  the 
wagon  which  can  be  obtained  by  the  installation  of  a  cyclometer  on 
the  wagon.  The  driver's  record  can  then  be  checked  by  computing 
the  number  of  packages  delivered  per  working  hour  per  mile. 

13 


I 


>= 


Studebaker  Commercial  Car 

OWNER'S  MONTHLY  OPERATING  EXPENSE  RECORD 


NOTEt— ThU  farm  t*  b*  mmim  ay  at  mmi  •§  m 
•f  MM  ia  Mtketity  mmd  wk*  auir  httwm  rfiMCt 


DRIVEIt'S  DAILY  OPERATINC  REPORT,  i 


la  A* 


Typ^ 


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DATE 
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Gal. 

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PUTIN 
TKANS. 
CREASE 

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Labor 
Rtwalw    ftUtarial 
TbM 

POUSM 

REMAMCS 

1 

a 

3 

4 

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7 

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t 

10 

11 

12 

19 

14 

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14 

11 

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22 

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31 

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TOTALS  AND  SUMMARY  FOR  THE  MONTH 


NUMIER 


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tram  CmmbmcUI  Ct  Dimto*.  S«iU«b«liw  CerperaliMi  •#  AMarica.  I>««*H.  Mick 

14> 


iJITICLE 


PIUCS 


EXTENSKW 


TeUl 


GaL  GatoKw 

GaL  Ubricatint  OM 

Lb*.  Traa*.  Graaaa 

Matal  PoUtk 

Body  Poliah 

Tira  Rapair 

Repairs  to  Car 

Drivan  Salarica 

Dalhrary  Boy'»  Salary 

Garafiaf  of  Car  if  sot  privately  kapt 

lataraat  oa  f  at        %  per  moodi 


Dapredatioa  oa  $  at 

InsutaBca  (lasured  value  $ 
per  iBOBth 


Uccaee  and  tax 


%per  BMBth 


)  PraBuum 
per  month 


Total  Day*  Sarvica. 


Packacea  Del- 


Total  Mileaca- 


■  Averate  Deliveries  per  day_ 

_    "         Mile*  "     ••    - 

_      ••  "  per  Gallon. 

"  **  per  day__ 


Delivery  Coat  per  Package- 


Total  Cost  (everything  included)  I  month's  operatioo. 


NOTE  TO  OWNERi-A  caraMkaapiac  and  dote  analrii*  ol  llut  report  from  moatk  to  Bonth  will  anaUe  yoa  to  analy.e  your  dek*ery  cost*  ••>  ile««l 
la  the  ovaal  tkat  yoa  fca^e  two  or  More  coraarcial  ear.  ■»  operatiea.  Uu.  aioatUy  operatiat  espeiue  r«ord  tiMuM  anaUe  you  to  atiake  an  lalelb*.*!  t*«- 
pariMW  o«  Ike  rdali*o  ability  of  row  driven  to  kaadU  their  car*  eco>oiaicanra>de«>cieatl7.  SbouU  tbe  drirara  daily  report  .how  ^o.no.1  *-^«  »»* 
,  U  ptmrtiaa  to  ailaa  IravelbJ.  it  worfd  iadiaato  tbat  the  Mvar  b  aot  Hiwiag  the 
I  wkh  aa  eleclria  starter,  which  caa  bo  «Md  at  ae  addUiMal  coil. 


at  loadias  and  dcKvary 


The  car  M 


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One  of  the  most  difficult  problems  in  the  management  of  equip- 
ment of  this  sort  is  to  prevent  abuse  of  the  equipment  by  the  drivers. 
The  existence  of  abuse  can  be  determined  from  these  records  which 
reveal  conditions  of  extraordinary  expense  for  repairs,  or  imusual 
consumption  of  oil  and  gasoline.  In  the  case  of  horse  equipment, 
this  is  perhaps  more  difficult,  but  some  concerns  weigh  their  horses 
periodically,  attributing  the  loss  of  weight  on  the  part  of  the  horse 
to  overwork  or  some  form  of  abuse. 

In  determining  what  type  of  equipment  is  most  economical  in 
performing  a  given  delivery  service,  all  of  the  above  considerations 
must  be  weighed.  The  general  results  of  such  a  summary,  under 
average  conditions  for  package  deUvery  and  for  coal  and  other  bulk 
commodities,  are  summed  up  in  two  charts  pubHshed  by  the  Electrical 
Engineering  Department  of  the  Massachusetts  Institute  of  Tech- 
nology, showing  the  cost  for  delivery  in  different  types  of  equipment, 
working  in  different  zones  and  under  different  conditions,  both  for 
electric  current  and  gasoUne.  These  charts  are  reproduced  in  Figures 
III  and  IV  on  the  following  page.  They  indicate  that  for  delivery 
inside  of  a  two  mile  zone,  the  horse  is  the  more  economical  means, 
while  from  two  to  three  miles  the  horse  and  electrical  apparatus  are 
about  equally  expensive;  from  this  point  and  up  to  the  Hmit  of  daily 
mileage  for  an  electrical  vehicle,  the  electric  motor  truck  is  cheaper. 
This  hmit  is  fixed  in  the  chart  at  ten  miles  from  the  starting-point, 
which  is  considered  to  include  the  maximum  area  of  service  for  an 
electric  machine,  when  the  irregularities  of  the  run  are  considered. 
Beyond  that  point  gasoline  trucks  are  the  only  means  of  delivery  which 
are  available. 

In  the  case  of  a  concern  which  works  both  horse  and  motor  truck 
equipment,  it  is  economical  to  work  the  horses  entirely  upon  the 
nearby  territory  and  to  let  the  motor  trucks  begin  their  dehveries 
when  they  reach  a  point  two  or  three  miles  from  the  store.  It  is 
usually  the  best  policy,  however,  for  a  concern,  unless  it  be  an  ex- 
tremely large  company  doing  a  heavy  dehvery  business,  such  as  a 
large  department  store  or  an  express  company,  to  confine  itself  to 
one  type  of  equipment,  after  determining  carefully  which  type  is 
best  suited  to  the  great  bulk  of  its  business.  This  standardization 
of  equipment  promotes  economy  in  operation  and  maintenance.  If, 
for  instance,  one  type  of  machine  is  operated  exclusively,  the  proper 
facihties  for  handling  and  loading  apparatus  to  make  it  most  effective 
in  its  work,  may  be  developed,  but  if  horse  equipment  and  motor 

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at^^pe"  >•»'  A/j  vpfier  cor^e^t  ¥¥^ai' Mtnhr. 

I  ower  evrtne  for  ^30  ///»*•  cars  tt  f»r  f0s«/tj*a  at  /T/ 
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18 


Repro^ue^  Sy  prrmStgitt*  ^r»tr* 
^^ptrton  y^iaftov  n»tam  mf  /1»rsa, 
e/mcfrte,  »na  C»a»hna  Trucka'  *jf 


trucks  are  operated  in  conjunction,  the  methods  of  loading  which  are 
suitable  for  horse  equipment  are  likely  to  be  applied  to  the  motor 
trucks  with  poor  results.  Likewise,  if  electric  and  gasoline  cars  are 
operated,  it  is  necessary  to  handle  two  entirely  different  types  of 
motor  car  and  two  distinct  sets  of  parts  for  different  machines,  and 
employ  drivers  skilled  in  the  management  of  different  types  of  equip- 
ment, all  of  which  presents  difficulties  in  management  and  tends  to 
produce  inefficient  results. 

Routing  Deliveries, — The  territory  which  each  vehicle  shall  cover 
on  each  trip  should  be  carefully  laid  out  by  some  one  thoroly  familiar 
with  the  business  and  the  conditions  of  delivery  service,  taking  into 
consideration  the  mileage  which  must  be  made,  the  number  of  de- 
liveries which  occur  on  a  trip  under  normal  conditions,  and  the  num- 
ber of  trips  which  a  vehicle  is  to  make  in  a  day.  There  is  certain 
territory  over  which  it  is  desirable  for  a  company  to  make  deUveries 
two  or  more  times  a  day  and  there  is  other  territory  which  may  need 
to  be  covered  only  once  a  day.  By  estimating  the  average  mileage 
to  be  traveled  on  a  trip,  and  figuring  an  average  amount  of  time  for 
each  of  the  daily  average  number  of  deliveries,  their  routes  can  be 
planned  so  as  to  occupy,  with  an  allowance  for  loading  time,  the  full 
time  of  the  car.  It  is  worth  while,  where  a  considerable  number  of 
deliveries  are  to  be  made,  to  send  a  man  with  a  watch  to  make  a  time 
study  of  the  delivery  service.  He  can  note  on  each  of  the  trips  that 
he  makes  the  actual  time  required  to  deliver  each  parcel  and  the  actual 
time  for  making  each  run  between  each  point  of  delivery.  Such  time 
study  will  make  possible  the  establishment  of  a  much  more  accurate 
standard  than  can  be  obtained  from  the  acceptance  of  the  statistical 
results  of  the  drivers'  actual  service.  The  timing  of  each  step  in  the 
whole  series  of  dehveries  will  often  offer  suggestions  for  improvement, 
from  which  the  drivers  may  be  trained  to  increase  their  efficiency. 

The  Assembling  of  Materials  for  Delivery. — In  the  delivery  serv- 
ice of  large  department  stores,  it  is  essential  to  keep  the  equipment 
on  the  road  as  much  of  the  time  as  possible.  The  usual  practice  in 
such  institutions  is  to  assemble  all  packages  for  delivery  on  a  certain 
route  in  a  bin,  so  that  the  driver's  load  is  ready  for  him  when  he  comes 
to  the  store  to  load  for  a  trip.  A  typical  system  of  this  sort  is  as 
follows : 

The  packages  for  delivery  are  received  in  the  assembling  room 
from  a  chute.  At  the  foot  of  the  chute  stands  a  man  who  is  thoroly 
familiar  with  all  of  the  locations  of  different  addresses  thruout  the 

10 


territory  to  be  covered  and  with  the  numbers  of  the  routes.  He  takes 
each  package  as  it  comes  down  the  chute  and  marks  upon  it  the  route 
number.  The  package  is  then  placed  on  a  conveyor  running  at  right 
angles  to  the  chute,  which  extends  between  two  rows  of  bins,  each  one 
of  which  has  a  route  number.  From  the  conveyor  the  goods  are 
thrown  into  the  bin  for  the  route  number,  which  has  been  marked 
on  the  parcel.  These  bins  are  open  at  both  sides  and  on  the  opposite 
side  from  the  conveyor  are  clerks  who  make  up  the  delivery  lists. 
These  clerks  work  up  and  down  the  aisles  behind  the  route  bins.  As 
the  packages  come  into  the  route  bins  the  clerks  take  them  and  enter 
the  name  and  address  of  the  people  to  whom  they  are  to  be  delivered, 
and  the  charges,  on  the  delivery  list.  When  a  package  has  been  en- 
tered on  the  dehvery  list,  it  is  thrown  into  another  bin  immediately 
opposite  the  first  row  and  across  the  aisle,  where  it  remains  until  the 
driver  comes  to  load  his  wagon.  Separate  delivery  lists  are  used  for 
C.  O.  D.  parcels  and  for  parcels  which  have  been  paid  for  or  charged 
to  an  account.  At  the  time  of  the  entry  of  these  parcels  on  the  delivery 
list,  each  one  is  given  a  list  number  which  corresponds  with  the  order 
of  the  printed  numbers  on  the  delivery  list  sheet. 

When  the  driver  comes  in  to  load  his  wagon  he  is  given  a  sheet 
which  is  identical  with  the  delivery  list  and  then  lists  his  parcels  in 
the  order  of  the  numbers  given  them  by  the  delivery  list  clerk.  When 
he  has  taken  all  of  the  parcels  out  of  the  bin,  the  list  which  he  has 
made  is  checked  up  with  the  list  which  was  made  out  by  the  clerk.  If 
there  is  any  discrepancy  it  must  be  found  before  the  goods  can  be 
removed  from  the  store,  but  if  the  lists  correspond,  the  driver  signs 
the  delivery  list  made  up  by  the  clerk  as  a  receipt  for  the  parcels  in 
the  bin  and  proceeds  to  load  them  in  his  wagon. 

After  delivery  routes  have  once  been  laid  out  by  the  management, 
it  is  necessary  to  leave  the  actual  covering  of  the  route  entirely  to  the 
discretion  of  the  driver,  since  the  deliveries  on  various  parts  of  the 
route  will  vary  considerably  from  day  to  day.  The  driver  will  con- 
sequently not  follow  the  same  line  of  travel  every  day,  but  will  vary 
his  plan  so  that  the  section  of  the  route  in  which  the  greatest  number 
of  deliveries  lies  will  be  covered  first  on  any  given  trip.  With  this 
point  in  view  the  driver  will  arrange  the  goods  in  his  wagon  so  that 
those  which  are  for  delivery  on  the  streets  which  he  will  reach  first 
are  in  the  back  end  of  the  wagon  and  those  which  will  be  reached  late 
on  the  trip  are  in  the  front  end  of  the  wagon. 

It  is  usually  customary  in  large  cities,  or  where  there  is  danger  of 

20 


> 


^ 


theft,  to  send  at  least  two  men  with  each  delivery  vehicle,  with 
instructions  that  one  of  them  shall  always  be  at  or  near  the  wagon. 
Much  time  can  be  saved  for  the  vehicle  by  having  one  or  more  extra 
men,  where  deliveries  are  many  within  the  limited  space,  so  that  two 
can  work  without  taking  both  men  out  of  sight  of  the  vehicle. 

The  distance  which  a  vehicle  must  cover  between  the  store  and 
the  first  delivery  is  an  important  factor  in  economy  of  operation. 
Consequently,  where  a  considerable  volume  of  deliveries  is  made  in 
suburban  or  outlying  districts  within  a  large  city,  it  is  usual  to  send 
the  goods  in  bulk  in  large  trucks  to  a  suburban  delivery  station,  where 
they  are  assembled  for  dehvery  in  smaller  vehicles,  according  to  well- 
defined  routes.  In  sorting  goods  at  the  store  for  shipment  to  these 
outlying  stations,  the  goods  are  often  placed  directly  in  extra  bodies 
for  the  big  trucks,  instead  of  being  placed  in  the  route  bins.  The 
truck,  when  it  arrives  at  the  store,  then  simply  leaves  its  empty  body 
and  the  loaded  body  is  placed  on  it,  so  that  very  little  time  of  this 
expensive  equipment  is  taken  in  loading  and  unloading. 

In  the  case  of  retail  groceries  and  markets,  where  the  driver  goes 
out  on  one  trip  to  take  orders  and  make  the  deliveries  later,  it  is 
usually  necessary  to  have  him  assist  in  putting  up  the  goods,  since  his 
time  would  be  idle  if  the  goods  were  entirely  put  up  by  some  one  else. 
It  is  not  desirable  to  let  the  driver  put  up  his  orders  entirely  by  him- 
self, since  this  offers  an  opportunity  for  dishonesty.  In  providing 
him  with  an  assistant  there  is  a  check  against  dishonesty  and  a  saving 
of  time  for  the  delivery  vehicle. 

It  is  often  the  practice  to  have  the  shipping  clerk  call  off  to  the 
driver  the  different  packages  as  they  are  loaded  on  the  wagon.  This 
is  by  no  means  as  good  a  check  on  the  driver,  however,  as  the  signing 
of  a  delivery  hst,  made  out  by  some  other  clerk  and  verified  by  the 
driver,  as  was  outlined  in  the  section  above  describing  department 
store  practice. 


21 


^^A 


l):ZS  i4^S 


/fl^ 


UGi  2  5 


Date  Due 

1950^ 


1^ 


/: 


Alexander  Haniilton  institute,N.Y. 
He tail  delivery  costs  and  methods 


COLUMBIA  UNIVERSITY  LIBRARIES 


0041411650 


i 


EH 


^'^121994 


A?5/-/   0/271 


JUN3     W3^ 


v^V 


.^v 


^^ 


i«if  .  .;,??B?:,)-r»5T5  .    irJ'- 


END  OF 
TITLE 


